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AGGREGATE PRODUCTION PLANNING

AGGREGATE PRODUCTION PLANNING. Business Planning Exercise. Business plan is strategic in nature and addresses the following questions: Should we meet the projected demand entirely or a portion of the projected demand?

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AGGREGATE PRODUCTION PLANNING

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  1. AGGREGATE PRODUCTION PLANNING

  2. Business Planning Exercise • Business plan is strategic in nature and addresses the following questions: • Should we meet the projected demand entirely or a portion of the projected demand? • What are the implications of this decision on the overall competitive scenario and the firm’s standing in the market? • How is this likely to affect the operating system and planning in other functional areas of the business such as marketing and finance? • What resources should we commit to meet the chosen demand during the planning horizon? • Aggregate production planning seeks to translate business plans to operational decisions

  3. Hierarchical Approach to Planning Business Plan Financial Plan Marketing Plan Production Plan (rough cut capacity) Level 1 Level 2 Master Production Schedule Materials Requirement Plan Capacity Requirement Plan Detailed Scheduling Shop Floor Control Level 3

  4. Aggregate Production PlanningDecision Variables: An illustration • The decisions involve • Amount of resources (productive capacity and labour hours) to be committed • Rate at which goods and services needs to be produced during a period • Inventory to be carried forward from one period to the next • An example from Garment Manufacturing • Produce at the rate of 9000 metres of cloth everyday during the months of January to March • Increase it to 11,000 metres during April to August • Change the production rate to 10,000 metres during September to December • Carry 10% of monthly production as inventory during the first 9 months of production. • Work on a one-shift basis throughout the year with 20% over time during July to October

  5. Aggregate Units for CapacityExamples

  6. Aggregate Production PlanningWhy is it necessary? • Demand fluctuations • Capacity fluctuations • Difficulty level in altering production rates • Production systems are complex and varying the rate of production requires prior planning and co-ordination with supplier and distributor • Benefits of multi-period planning Aggregate Production Planning is done in an organisation to match the demand with the supply on a period-by-period basis in a cost effective manner

  7. Aggregate Production Planning Framework Alternatives for Modifying demand Forecasting Arriving at effective Period-by-period Demand to be met Targeted Demand to be fulfilled Arriving at Period-by-Period Supply Schedules Actual period-by-period Supply Schedules - Alternatives for Modifying supply

  8. Alternatives for managing demand • Reservation of Capacity (app by doctors) • Influencing Demand • Special Tariffs • Differential Discount Structures • Limited period special offers

  9. Alternatives for Managing Supply • Inventory Based Alternatives • Stock out, Backordering/Backlogging • Carrying Inventory • Capacity Adjustment Alternatives • Hiring/Lay-off of workers • Varying shifts • Varying Working Hours (OT,UT) • Capacity Augmentation Alternatives • Sub-contracting/Outsourcing • De-bottlenecking • Addition of new capacity

  10. Aggregate Production Planning Alternatives

  11. Aggregate Production Planning Two generic strategies • In level strategy, the emphasis is not to disturb the existing production rate at all • In chase strategy, no effort is made to carry inventory from one period to another; the supply – demand mismatch is addressed during each period by employing a variety of capacity related alternatives

  12. Master Production Scheduling Linkages with APP & Forecasting Aggregate Production Planning Forecasting Order Inflow Market Master Production Scheduling Capacity Plan Materials Plan Labour & Resources Vendors Actual Production Resource availability Material Inflow

  13. Hierarchical Planning Process Production Planning Capacity Planning Resource level Items Product lines or families Aggregate Resource Plants Production Plan Requirements Plan Individualproducts Critical work centers Master Production Rough-Cut Schedule Capacity Plan All work centers Material Capacity Requirements Plan Requirements Plan Components Manufacturing operations Individual machines Shop Floor Input/Output Schedule Control

  14. Aggregate Production Planning Master Production Scheduling Revise MPS or Expand Capacity Is Capacity OK ? NO YES MRP

  15. Executive Line Durable Line Umbrella Compact Line Example

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